The Sunday Mail
THE Reserve Bank of Zimbabwe (RBZ) has assumed control of Government’s revenues account from CBZ Bank as Treasury intensifies efforts to restore confidence in the financial services sector. CBZ Bank, which has been handling Government’s consolidated revenue account during the past five years, started transferring the account to the central bank on Monday.
RBZ Governor Dr John Mangudya told The Sunday Mail Business that the process is expected to be concluded by the end of this month.
“The process of moving the Exchequer Account from CBZ started last week on Monday and we are doing it up to the end of the month to ensure a smooth process as I alluded before the parliament portfolio committee,” said Dr Mangudya.
CBZ bank acknowledged moving the Exchequer Account last week, noting that the move did not have any effect on their balance sheet.
“Government accounts were moved over to RBZ effective 7th of July. The move did not have negative material effect on our balance sheet because we had planned for this over a long period of time. In fact, we would like to take this opportunity to thank the Government for the level of trust in handling the consolidated account and nine of its ministries,” said CBZ Bank.
The process was initially scheduled to have been completed in March this year.
Government announced in the 2014 National Budget that the RBZ was going to assume its traditional function as the banker to Government.
Efforts to recapitalise the apex bank are also currently underway.
It is understood that there is a foreign investor willing to inject capital by the end of this month.
Sources say all that is needed is a guarantor and the reactivation of the Exchequer Account.
“All Government deposits will be channelled to the central bank, which will also be responsible for raising funds through the issuance of Treasury Bills.
“The capital injection will result in the re-emergence of overnight lending, revival of the interbank market and ultimately improve confidence in the financial services sector.
“The investor will also finance our agriculture activities,” said a source.
Already, Cairo-based African Export and Import Bank (Afreximbank) has since unveiled a US$100 million facility for the interbank programme.
If the LOLR (Lender of Last Resort) facility is restored, the central bank will be able to offer loans to banks and other eligible institutions that are experiencing financial difficulty or are considered highly risky and nearing collapse.
Interest rates are also expected to drop. International Monetary Fund (IMF) authorities and local banks have in the past raised the red flag, warning of an imminent exposure of banks in the absence of a lender of last resort.
The Zimbabwe Stock Exchange-listed CBZ Holdings Limited, the country’s largest financial institution by assets, is involved in commercial banking, through its flagship arm CBZ Bank; mortgage lending; asset management and insurance.
Government holds a 21 percent stake in the group.
Economist Mr Brains Muchemwa said the transfer of the Exchequer Account was likely to restore confidence in the financial sector, adding that the development will not affect CBZ’s balance sheet.
“The transfer of the exchequer account to the RBZ from CBZ, which has long been overdue, confirms government’s confidence in its own institutions and strengthens the role of the RBZ in the financial markets. . .
“Of course the move closes a once vital source of stable liquidity inflow on the CBZ balance sheet. However, considering that the move was communicated well in advance, it is most likely that CBZ had realigned its balance sheet to absorb the likely impact. In any case, the Government has been running a very tight cash budgeting framework and as such it’s most likely that it didn’t keep huge balances on CBZ account that would cause serious liquidity upsets,” added Mr Muchemwa.
